Leveraged Public to Private Transactions in the UK

48 Pages Posted: 19 Apr 2005

See all articles by Mike Wright

Mike Wright

Nottingham University Business School

Tomas Simons

McKinsey & Co. Inc. - Amsterdam Office

Luc Renneboog

Tilburg University - Department of Finance; European Corporate Governance Institute (ECGI); Tilburg Law and Economics Center (TILEC)

Date Written: April 2005

Abstract

This paper examines the magnitude and the sources of the expected shareholder gains in UK public to private transactions (PTPs) in the second wave from 1997-2003. Pre-transaction shareholders on average receive a premium of 40% and the share price reaction to the PTP announcement is about 30%. The main sources of the shareholder wealth gains are undervaluation of the pre-transaction target firm, increased interest tax shields and incentive realignment. An expected reduction of free cash flows does not determine the premiums nor are PTPs a defensive reaction against a takeover.

Keywords: Public to private, going-private, LBO, MBO, IBO, Management buyins, Management buyouts,Leveraged buyouts

JEL Classification: G34, G32

Suggested Citation

Wright, Mike and Simons, Tomas and Renneboog, Luc, Leveraged Public to Private Transactions in the UK (April 2005). ECGI - Finance Working Paper No. 78/2005. Available at SSRN: https://ssrn.com/abstract=704302 or http://dx.doi.org/10.2139/ssrn.704302

Mike Wright

Nottingham University Business School ( email )

Jubilee Campus
Wollaton Road
Nottingham, NG8 1BB
United Kingdom
+44 115 951 5257 (Phone)
+44 115 951 5204 (Fax)

Tomas Simons

McKinsey & Co. Inc. - Amsterdam Office ( email )

Amstel 344
Amsterdam, 1017 AS
Netherlands
0031 205513009 (Phone)
0031 205515009 (Fax)

Luc Renneboog (Contact Author)

Tilburg University - Department of Finance ( email )

P.O. Box 90153
Warandelaan 2
5000 LE Tilburg
Netherlands
+13 31 466 8210 (Phone)
+13 31 466 2875 (Fax)

European Corporate Governance Institute (ECGI)

c/o ECARES ULB CP 114
B-1050 Brussels
Belgium

Tilburg Law and Economics Center (TILEC)

Warandelaan 2
Tilburg, 5000 LE
Netherlands

Register to save articles to
your library

Register

Paper statistics

Downloads
911
Abstract Views
3,966
rank
24,418
PlumX Metrics